(Re)Conceptualizing Insider Trading : United States v. Newman and the Intent to Defraud

Insider trading law is a mens rea morass. The confusion concerning the mental element of this crime risks both the deprivation of fair notice to potential defendants and the abuse of prosecutorial discretion. In the wake of aggressive and high-profile insider trading prosecutions, these concerns are particularly salient. The Second Circuit's decision in United States v. Newman takes an important first step in articulating the mens rea component of insider trading. Taking Newman as a starting point, this article seeks to re-conceptualize and systematize insider trading law. When articulating the mens rea of insider trading, courts should focus on the underlying concept of insider trading law: the harm caused by the breach of trust attendant to the theft of inside information. When a court clearly focuses on the core purpose of insider trading law, the second level of reform is possible. That is, we can assess the culpability of alleged inside traders by the harm that they intended to cause and assign levels of mens rea accordingly. Applying common law fraud principles, and using Model Penal Code terminology and methodology, this article identifies the elements of insider trading and attaches appropriate levels of mens rea to each element. The article concludes with a set of jury instructions that reflect these underlying principles